The Top 5 Financial Regrets and How to Prevent Them

A recent National Foundation for Credit Counseling (NFCC) online poll surveyed more than 2,200 people about their greatest financial regrets, and five financial actions–or inactions–topped the list.

Habitually overspending

Inadequately saving

Buying a house

Not buying a house

Not saving enough for retirement

Frankly, what’s “regrettable” depends on whose life–and financial situation—we’re talking about: While buying a house could be the right move for one person, not buying a house could be better for another. When reading through these regrets and solutions, make sure to keep in mind what’s right for you in your situation.

1. Habitually Overspending

Most of us have felt the pang of guilt that accompanies overspending at one point of another. But what if you’re worried it’s become a habit–and you’re watching your money slip away? Everyone spends for different reasons, and the key to combating overspending is to identify why you spend. Do you have one of these spending triggers?

The Emotional Spender: You buy because it makes you feel better when you’re down.

The Compulsive Spender: Buying gives you a high, so you spend money all the time.

The Absentminded Spender: You don’t pay attention to all the little things, so when you get your credit card bill you have no idea how you spent so much.

The Social Spender: You spend more when you’re with friends.

The ‘It’s on Sale’ Spender: You can’t resist a sale, even if you don’t need (or particularly love) the item.

How to Keep It From Happening: Try these strategies to fight back:

The Emotional Spender: Instead of retail therapy, address the real problem. Talk with a friend, write in your journal, visit your therapist and ask yourself if you’re buying because you need the item or because you think it will make you feel better about what’s really fueling your buying sprees.

The Compulsive Spender: Find something else that makes you feel as good as spending money (preferably something free or inexpensive). Exercise? A creative activity? Volunteering? If you feel you need help recovering from a shopping addiction, visit a resource such as Shopaholic No More.

The Absentminded Spender: For one month, stop using your cards, just use cash and track your spending. Allot yourself a certain amount per week, and see how little things add up. When you ease back onto cards, check your spending every day with our free Financial Inbox.

The Social Spender: When approaching a social situation, think about what you really want from the experience—a $100 dinner tab that stretches your budget or quality time with your best friend?

The ‘It’s on Sale’ Spender: You need the help of a more level head. Someone that can help you think through whether you really want the item, whether it is such a good deal or whether another similar deal is around the corner. Or, you can always use our Purchase Appraiser.

If you don’t have a particular spending trigger, you should still create a budget and take stock of your spending every day in your Financial Inbox. That’s the best way to make sure you’re not going over. For more information on overspending, check out our Psych of Money section. If you find yourself in debt, our free Get Out of Debt Bootcamp can help you figure out how to escape.

2. Inadequately Saving

It’s easy to let savings take a backseat to bills and–let’s be honest–the occasional night out. But a savings account is a lot like an umbrella: When you need it, you’ll be so glad it’s there. We recommend your emergency fund consist of the equivalent of at least six months of net income. (More on exactly how you should create and use an emergency fund here.)

How to Keep It From Happening: To save effectively, you need to create a budget, keep track of your expenses, have a target savings goal and work toward it. Fortunately, we can help you with all of these. Use the LearnVest My Money Center to set your budget. We recommend setting your budget up according to the 50/20/30 rule (which you can learn more about here).

If you want to be walked through setting up financial savings goals, take our free, two-week Take Control Bootcamp. If you’re looking for a little more money to send to savings, our free Cut Your Costs Bootcamp will help you shrink your bills so you can devote more money to your savings.

3. Not Buying a House

There are a lot of reasons we might not buy a house. Maybe you don’t know where you want to settle down. Maybe you want to wait until you have a family. Maybe you just don’t have that kind of cash on hand. But here’s the tricky thing about this particular regret: Unlike saving inadequately, which everyone would regret, not buying a home is actually the right move for many people.

How to Keep It From Happening: To keep from regretting not buying a house, you need to buy only when it makes sense for you. If you can say yes to the following questions, then it could be the right move:

Do you have enough saved up to not only make a down payment but also leave your emergency fund and retirement savings intact?

Do you plan to live in the house for at least five years, so you’ll be able to recoup your moving investment?

In the area where you want to buy, is your price-to-rent ratio more in favor of buying?

4. Buying a House

It’s the other side of the coin: regretting taking the plunge and buying a house. Since we don’t imagine people are regretting having somewhere to live, it’s likely that this regret stems from having what is called an underwater mortgage, a situation that one in three United States homeowners is currently struggling with.

This means that they owe much more on the house than it’s worth in the current market, so they can’t sell it unless they have the cash to make up the difference on hand. This situation, in which the homeowner can’t afford the mortgage payments but also can’t afford to sell, often leads to foreclosure.

How to Keep It From Happening: To prevent homebuyer remorse, you need to buy only when it’s right for you (see above). If you’re already in the unfortunate situation of having an underwater mortgage, we present your options here. For some people, strategic default–simply walking away from the house and leaving the mortgage unpaid–is a viable option, but that depends where you live and on your individual situation. To consider whether it’s right for you, read this.

5. Not Saving Enough for Retirement

No matter how far (or near) your retirement is, if you intend to maintain your current standard of living without bringing home a salary, you’ll need the funds to cover your living and entertainment expenses, not to mention medical or family emergencies, which become more common as we grow older. The easiest way to have that money when you need it? Start putting it away today.

How much should you allocate to this goal? About 20% of your salary should go toward your financial priorities, which include retirement, debt payment and other savings.

How to Keep It From Happening: Save, save, save. We cover the basics of what you need to know about 401(ks), IRAs and more here, and for more information we have an entire section of the Knowledge Center devoted to retirement. Not sure where to start? Begin with our checklist: I Want to Save for Retirement, which will walk you through everything you need step by step.

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LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc. that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment advice. Please consult a financial adviser for advice specific to your financial situation. LearnVest Planning Services and any third-parties listed, discussed, identified or otherwise appearing herein are separate and unaffiliated and are not responsible for each other’s products, services or policies. LearnVest, Inc. is wholly owned by NM Planning, LLC, a subsidiary of The Northwestern Mutual Life Insurance Company.